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Oct 27 Should you invest in diamonds?

It wasn’t so long ago that diamonds were the investment choice of the seasoned expert. Nowadays the market has opened up to the everyday investor. It’s staggering to think that just 15 years ago, 80 percent of all rough diamond business was handled by one single business, De Beers. They also had a hand in the production, controlling almost half of global diamonds produced annually.

This all changed when the company’s controlling dynasty, the Oppenheimers, sold out – and the discovery of new mines loosened De Beers’ grip on the industry – the market was thrown open. This allowed the speculators to throw more money into the sector, in an attempt to take advantage of the greater price fluctuations. With more produces in the market, the prices became stretched and the larger producers struggled to adapt with their old burgeoning business overheads.

All of this change had its downsides. This market change exposed the industry’s weaknesses by paving the way for a new army of shysters and con-merchants. Many media investigators uncovered a vast number of diamond scams, with the sole intent to cone as many amateur investors into dodgy schemes, often involving non-existent gems.

The real issue many face in the industry is the difficulty with value, it’s hard to get an agreed price. With other precious commodities such as gold, the sheer variety of individual rocks rules out any simple cost-by-ounce pricing mechanism. With individual diamonds you can’t just take a view from the weight, other variables such as clarity and cut can play a major role. This leaves determining price down to personal preference.

So should you look to invest?

Investing in diamonds is always a difficult decision, but the markets current state does look stable. The growing development of the engagement ring market in new consumer economies like China is helping the current price rises, and with investment brokers offering good entry levels of £10,000 the timing and risk seem well balanced.